The Japan–Singapore Economic Arrangement for a New Age Partnership (JSEPA) is Singapore’s first free-trade agreement (FTA) with a major trading partner and Japan’s first-ever FTA. It came into effect on 30 November 2002, and the next review of the accord is scheduled to be held after 31 December 2017.

BackgroundAt talks held in Seattle, United States, in December 1999,1 the World Trade Organization (WTO) failed to initiate a new round of trade negotiations among the world’s trading nations. As a result, Japan’s sole reliance on the WTO put it at risk of losing its trading competitiveness.2 One of Singapore’s strategies for buffering for economic growth then was to diversify out of the ASEAN (Association for Southeast Asian Nations) region and connect with markets in countries like Japan, America and Europe.3 Hence when Singapore proposed an FTA with Japan, feasibility discussions began immediately in March 2000.4 This was Singapore’s first FTA with a major trading partner,5 and Japan’s first-ever FTA, and was seen as a strategic step in linking Northeast Asia and Southeast Asia.6 Japan had been among Singapore’s top three trading partners since the 1980s, and was Singapore’s third-largest trading partner in 1999.7

Study and negotiationA Japan–Singapore joint study group was formed in early 2000 to study the feasibility and desirability of having an FTA between the two countries.8 The group comprised government officials, prominent academics and business leaders from both countries.9

On 29 September 2000, the group submitted its report to the prime ministers of Singapore and Japan, and recommended that the two countries commence negotiations the following year.10 It concluded that the partnership would bring considerable benefits to both countries, with greater opportunities and economies of scale for Japanese and Singapore businesses, while regulatory and policy reforms for both countries would attract capital and talent.11 High-growth sectors of the coming years were identified for cooperation initiatives. These included financial and telecommunication services, e-commerce, science and technology, human capital management, and the development of small and medium enterprises.12

In a joint statement made on 22 October 2000, the then prime ministers of Singapore and Japan, Goh Chok Tong and Yoshiro Mori respectively, announced the launch of the agreement negotiation.13 Representing Singapore was former ambassador to Japan, Lim Chin Beng, who was the chief negotiator.14 The Japanese delegate was led by then ambassador for global environment and international economic affairs, Kazuo Asakai.15

Significantly, during the negotiation Singapore proposed an agriculture-free FTA with Japan. This ensured a smooth negotiation, as Japan had not been keen to cut tariffs in agriculture, forestry or fisheries.16

DescriptionOn 13 January 2002, Goh and then Japanese Prime Minister Junichiro Koizumi signed the landmark agreement, officially known as the Japan–Singapore Economic Agreement for a New Age Partnership.17 The accord came into effect on 30 November 2002.18 Goh noted that this trade deal would provide a model for similar negotiations between Japan and other countries in Southeast Asia.19

The JSEPA provided freer cross-border movement of people, goods and services, capital and information between Japan and Singapore.20 Under the agreement, the majority of Singapore’s imports into Japan are duty-free, with a wide range of products eligible for preferential tariff treatment. The simplified customs clearance of goods through the use of information and communications technology, simplification of customs procedures and application of modern management tools resulted in greater time and cost savings. Under the mutual recognition agreements signed, electrical, electronic and telecommunications equipment avoided duplicate testing and thus saved significant time and costs.21

DevelopmentsDuring the first year of the agreement, the Japan External Trade Organization and the International Enterprise Singapore actively promoted trade in the two countries.22 Singapore and Japan both reported growth in tariff-free goods despite experiencing weak economic growth.23 Bilateral trade saw an increase of about 20 percent in five years.24

Revised agreementAs trade patterns developed over time and Japan’s new FTAs with other countries included new provisions, a review of the JSEPA was deemed necessary by Prime Minister Lee Hsien Loong.25 The revised JSEPA was signed on 19 March 2007, and came into force on 2 September 2007.26 Under the new terms, Singapore could have an additional S$10 million of tariff savings a year with an increase from 77 percent to 92 percent of all exported products qualifying for tariff concessions. Japan would also grant additional concessions for more than 1,340 agricultural products, which accounted for approximately S$400 million in domestic exports from Singapore.27 The tariff concessions came into effect on 1 January 2008.28

Other significant revised terms include allowing more made-in-Singapore products to qualify for tariffs, as henceforth 40 percent of the value of locally made products had to originate in Singapore compared with 60 percent in the past. In terms of financial services, Japan and Singapore would allow cross-border sales of collective investment products to institutional investors and through their respective local securities firms.29 Singapore would also permit a full banking licence for one more Japanese bank to operate in Singapore.30 Additionally, Singapore-based brokers could access Japan-based clients for marine, aviation and transit insurance and reinsurance on a cross-border basis.31

The next review of the JSEPA is scheduled to be held after 31 December 2017.32

The information in this article is valid as at 31 October 2017 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.